Vacation in Ontario: 10 Things Employers Need to Know

Since many employees have been on leaves of absence, had variation in their hours of work or have accumulated vacation due to the COVID-19 pandemic, we have noticed that many employers have questions regarding the calculation of employees’ vacation pay and the scheduling of their vacation time.

To assist provincially-regulated employers in Ontario, we have compiled a list of the ten statutory vacation requirements employers must meet to comply with Ontario’s Employment Standards Act, 2000 (the “ESA”).

  1. The obligation to provide vacation arises upon completion of each “vacation entitlement year”. An employee becomes entitled to vacation after each 12-month vacation entitlement year, which usually begins on the employee’s hire date. Where the employer establishes an alternative vacation entitlement year, the employee is entitled to a pro-rated period of vacation for the stub period from hire date until the start of the alternative vacation entitlement year.
  1. Vacation pay must equal at least 4% or 6% of gross wages. Employees with less than five years of employment are entitled to a minimum of 4% of the wages they earned during the vacation entitlement year as vacation pay. Employees with 5 or more years of employment at the end of a 12-month vacation entitlement year are entitled to at least 6% of the gross wages earned in the 12-month vacation entitlement year or stub period. “Wages” includes the employee’s regular earnings (including commissions), bonuses or gifts that are not discretionary or which are related to hours work, overtime pay, public holiday pay, termination pay, allowances for room and board, and domestic or sexual violence leave pay.
  1. Vacation pay must be paid as a lump sum before the vacation time. Generally, vacation pay must be paid to an employee in a lump sum before they take the vacation time earned unless one of the following exceptions applies:
    • The vacation time being taken is less than one week.
    • The employee has agreed in writing that vacation pay will be paid on each pay cheque as it accumulates.
    • The employee has agreed in writing to an alternate time for payment.
    • The employee is paid wages by direct deposit.
  1. Employees are entitled to 2 weeks or 3 weeks of vacation time.Employees are entitled to a minimum of 2 weeks of vacation time per year upon completion of 12 months of consecutive employment. The employee will then be entitled to 3 weeks of vacation after completing the 5th vacation entitlement year and for each vacation entitlement year thereafter.
  1. Employees must take vacation in 1 or 2 week blocks.The ESA requires employers to schedule vacation in 1 or 2 week blocks.

For employees whose period of employment is 5 years or more, employers must schedule the vacation time earned each vacation entitlement year in a block of:

  • three weeks
  • a two-week period and a one week period, or
  • three periods of one week

An exception to this requirement is available when the employee makes a written request and the employer agrees in writing for the vacation to be scheduled for shorter periods of time. Employers are not required to agree to these requests.

  1. Employers may schedule vacation time. The vacation time does not have to be requested by the employee.
  1. Vacation must be taken within 10 months of the vacation entitlement year.Employers must schedule the statutory vacation time earned to be taken within 10 months of the completion of the vacation entitlement year. Be careful of this carry-over period when contemplating "use it or lose it" policies.
  1. Vacation must not be scheduled during a period of statutory notice of termination. An employer must not schedule vacation time during an employee’s statutory notice period. An exception is available when, after having received the employer’s written notice of the termination of her employment, the employee agrees to take vacation time during the statutory notice period.
  1. Employees on vacation are entitled to public holiday pay. When a public holiday falls within an employee’s vacation time, the employee must receive either (a) a substitute day off work with public holiday pay within 3 months of the public holiday, or with the employee’s written agreement, within 12 months of the holiday, or (b) with the employee’s written agreement, public holiday pay without a substitute day off work. In order to qualify for public holiday pay, the employee on vacation must work all of their last regularly scheduled day of work before the public holiday and all of their first regularly scheduled day of work after the public holiday.
  1. Employees on leaves of absence accumulate entitlement to vacation.In general, the period of time that an employee is away from work because they are taking a leave of absence must be counted towards the employee’s completion of a vacation entitlement year or stub period.

When an employer has a vacation policy or has agreed to vacation-related terms in an employment contract that provide a greater benefit to employees than these minimum statutory requirements, the employer should ensure that it complies with the applicable policy or agreement. A unionized employer must ensure their vacation practices comply with any applicable collective agreements.

If you have any questions regarding vacation requirements in Ontario, please do not hesitate to contact any member of the Labour & Employment Group at McCarthy Tétrault.

Many thanks to Todd Pribanic-White, Articling Student, for his assistance with the preparation of this blog post.

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